Is there a difference between Offshoring vs Outsourcing?

It is a common ideology that people assume the varying terms Offshoring vs Outsourcing are transposable. However, this is a common mistake and throughout the following article we shall examine what each of these terms means individually, their varying aspects and exactly why one may be more beneficial to specific companies than the other.

Offshoring vs Outsourcing?

There is a slight correspondence between offshoring and outsourcing which can tend to cause confusion over which strategy would best integrate at your company. The answer is subjective and will depend on your various long-term strategies, current market conditions and of course financial needs.

What Is Outsourcing?

Outsourcing is an arrangement where a business practice hires a third-party provider to handle services that would traditionally be performed in-house by a company’s personal employees. This provides a company many advantages from increased efficiency, cost saving and an improved focus on the core of your business. For example, a marketing firm could be contracted to manage anything from a rebrand to a product launch.

Another example of outsourcing is recruiting a company specialized in communications that outsources their customer service.

There are many different reasons outsourcing may make sense to your company. Perhaps you are looking to expand your operations to a global market, by using outsourcing your in-house team are able to concentrate on their main tasks, while operations such as research and development can be handled by contractors.

Perhaps you need to hire more employees to keep up with the ever-growing market demand.

Maybe your company would like to gain access and understanding to new technology and learn how to correctly use it from the off.

Outsourcing vendors work with a variety of customers regularly and have all the necessary processes and solutions in place which can be very useful in speeding up your projects.

As you can see using an outsourcing strategy allows a company to focus on the operation of significant internal developments and outsource further functions to trustworthy vendors.

The Pros and Cons of Outsourcing

Two of the considerable advantages of outscoring are cost saving and contracting niche skill sets for varying projects.

When we say cost saving, we do not just mean that your companies will feel obliged to hire ‘less expensive workers’ but instead, by using outsourcing, your company can avoid all the extra costs that come when recruiting for new workers. The costs of hiring employees really adds up when you take into consideration job listings, payroll, onboarding and compensation insurance.

The second main reason for outsourcing; contracting niche skill sets for varying projects can really complement the current in-house team. Outsourcing is commonly used by companies when looking to scale their business into a new market or even to launch new products as the strategy of outsourcing allows the in-house-team to continue operating in their usual duties.

Sometimes it is just the case that a company has to outsource as a particular skill set is needed that is not available from the in-house team.

There are of course some shortcomings that can be met when using outsourcing that are worth considering. Outsourcing can create a reliance on the use of third-parties especially when the majority of work has been outsourced. It can also become problematic to retain a booming company culture when there is a high percentage of outsourced workers. It can also be challenging to gain customer loyalty and implement non-compete contracts.

The Pros and Cons of Offshoring

Where offshoring can be very beneficial in gaining access to a much larger and more varied pools of talent, generally offshoring is used to cut costs. Lower cost of living countries typically provides lower labor costs. Many consumers are apprehensive about the effects offshoring has on their local economies, furthermore they can complain of a lack of customer care when companies use offshoring. Not to mention companies can easily gain a bad reputation for their international contracts plus the lower working standards operational overseas.

Offshoring vs Outsourcing: Final Thoughts

Both outsourcing and offshoring can prove valuable strategies in utilizing the business productivity. When deciding which approach is most beneficial to your personal operation, consider which one most accurately aligns within the goals of your company. Always ensure the benefits outweigh the risks.

Whether you are looking to start delivering a higher standard of service, cut your costs or increase proficiency, both outsourcing and offshoring could assist you in the development and success of your business.

At Amploy we believe we have found the perfect balance between outsourcing and offshoring. From having all operations run through our office to setting up teams and entire departments for our clients, we have harnessed the benefits of both outsourcing and offshoring.

For example, when using Amploy for training purposes we have found it more efficient to focus sole training on the team manager. This saves time and costs as the fully trained team manager can relay all relevant information to new employees joining your company.

With Amploy you will not only find alluring prices and tax benefits but you will also have unlimited free access to our software developed to help you monitor your employees progress closely.

Please feel free to contact us for more information or any relevant question you may have.

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